Archive | October 2010

Understanding the RAF Amendment Act

What is limited? The income of the Claimant or the loss?

The important thing to remember is that the cap applies to the loss suffered in future years and
not to income.

The relevant cap is determined based on the date of accident. Example: if accident falls between 1/1/08 and 30/10/08 the cap is R160 000 per annum. The loss can still be assessed at the date of calculation, but the relevant cap as at the date of accident must be applied.

Take note that the annual loss in each future year is subject to the cap as at the date of the accident and no adjustment is made for increase in the cap amount.

For this purpose, loss in each future year is defined as:

– the value of the loss for each future year, in present money terms.
– the following factors need to be taken into account in calculating the loss for each year in present money terms:

1. Taxation
2. Mortality (i.e. the chance of the claimant(s) surviving each future year)
3. The real rate of interest (actuarial discount rate)

At present it is not clear whether merit apportionments should be applied before application of the cap or after.

Next month I will continue with this new series on understanding the application of the RAF amendment Act.

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